In the early part of 2024, the partners of Hugh, Jacobs, and Thomas sought assistance from a local accountant. They had begun a new business in 2023 but had never used an accountant's services. Hugh and Jacobs began the partnership by contributing $165,000 and $115,000 in cash, respectively. Hugh was to work occasionally at the business, and Jacobs was to be employed full-time. They decided that year-end profits and losses should be assigned as follows: • Each partner was to be allocated 10 percent interest computed on the beginning capital balances for the period. • • A compensation allowance of $10,000 was to go to Hugh with a $27,000 amount assigned to Jacobs. Any remaining income would be split on a 4:6 basis to Hugh and Jacobs, respectively. In 2023, revenues totaled $190,000, and expenses were $155,000 (not including the partners' compensation allowance). Hugh withdrew cash of $9,000 during the year, and Jacobs took out $14,000. In addition, the business paid $9,000 for repairs made to Hugh's home and charged it to repair expense. On January 1, 2024, the partnership sold a 10 percent interest to Thomas for $48,000 cash. This money was contributed to the business with the bonus method used for accounting purposes. Required: c. What journal entries should the partnership have recorded on December 31, 2023? d. What journal entry should the partnership have recorded on January 1, 2024?
In the early part of 2024, the partners of Hugh, Jacobs, and Thomas sought assistance from a local accountant. They had begun a new business in 2023 but had never used an accountant's services. Hugh and Jacobs began the partnership by contributing $165,000 and $115,000 in cash, respectively. Hugh was to work occasionally at the business, and Jacobs was to be employed full-time. They decided that year-end profits and losses should be assigned as follows: • Each partner was to be allocated 10 percent interest computed on the beginning capital balances for the period. • • A compensation allowance of $10,000 was to go to Hugh with a $27,000 amount assigned to Jacobs. Any remaining income would be split on a 4:6 basis to Hugh and Jacobs, respectively. In 2023, revenues totaled $190,000, and expenses were $155,000 (not including the partners' compensation allowance). Hugh withdrew cash of $9,000 during the year, and Jacobs took out $14,000. In addition, the business paid $9,000 for repairs made to Hugh's home and charged it to repair expense. On January 1, 2024, the partnership sold a 10 percent interest to Thomas for $48,000 cash. This money was contributed to the business with the bonus method used for accounting purposes. Required: c. What journal entries should the partnership have recorded on December 31, 2023? d. What journal entry should the partnership have recorded on January 1, 2024?
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter14: Partnerships And Limited Liability Entities
Section: Chapter Questions
Problem 24P
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Transcribed Image Text:In the early part of 2024, the partners of Hugh, Jacobs, and Thomas sought assistance from a local accountant. They
had begun a new business in 2023 but had never used an accountant's services.
Hugh and Jacobs began the partnership by contributing $165,000 and $115,000 in cash, respectively. Hugh was to
work occasionally at the business, and Jacobs was to be employed full-time. They decided that year-end profits and
losses should be assigned as follows:
• Each partner was to be allocated 10 percent interest computed on the beginning capital balances for the period.
• A compensation allowance of $10,000 was to go to Hugh with a $27,000 amount assigned to Jacobs.
•
Any remaining income would be split on a 4:6 basis to Hugh and Jacobs, respectively.
In 2023, revenues totaled $190,000, and expenses were $155,000 (not including the partners' compensation
allowance). Hugh withdrew cash of $9,000 during the year, and Jacobs took out $14,000. In addition, the business
paid $9,000 for repairs made to Hugh's home and charged it to repair expense.
On January 1, 2024, the partnership sold a 10 percent interest to Thomas for $48,000 cash. This money was
contributed to the business with the bonus method used for accounting purposes.
Required:
c. What journal entries should the partnership have recorded on December 31, 2023?
d. What journal entry should the partnership have recorded on January 1, 2024?
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